Taking depreciated property loss on Sch. D

[mactoolsix]

Does the taxpayer have a choice?
Situation:
Taxpayer had a SFR rental for a couple years. Has not rented (or attempted to) for 2 years - simply decided to hold it as investment property until the "market gets better." Sold in 2011, however still has a substantial loss. His 2011 income is quite low, thus using 4797 would waste a majority of the loss. If we could move it to schedule D, he could carryover the loss to 2012 where he will have a substantial capital gain. Using a NOL would not be as effective.

Can I simply reduce the basis by the depreciation taken? Since he has no AMT this year can we ignore the AMT depreciation difference?

Thanks for your thoughts!
Mike

[taxmom34]

how can you not report this sale on form 4797? it does it all for you. that form carries to schedule D the loss and puts the depreciation in as ordinary income on 1040.
Don't know what a SFR rental is, haven't seen that one yet. i hate it when people use these abbreviations that make me have to think harder than normal.

[mactoolsix]

how can you not report this sale on form 4797? it does it all for you. that form carries to schedule D the loss and puts the depreciation in as ordinary income on 1040.
Don't know what a SFR rental is, haven't seen that one yet. i hate it when people use these abbreviations that make me have to think harder than normal.

SFR = Single Family Rental (sorry for the abbreviation)
Form 4797 carries the loss on the sale to 1040 line 14 and the unused passive losses are taken on 1040 line 17. This is the normal way to report this, but can it be a capital loss instead?

If we can take the loss as a Sch. D capital loss, it will carry forward all but the 3,000 allowed loss to next year. Taking all the loss on line 14 (using 4797) will negate the majority of the loss as his income for 2011 is well below the total loss amount. In 2012 he will have a gain to offset the loss. Deducting the depreciation taken from the basis will accomplish this, but what to do about the AMT depreciation?

[Burke]

It was rental property, ergo, it goes on 4797 as you have described. It is not treated as a personal capital asset. NOL, maybe, but that's just the way it is.

[mactoolsix]

It was rental property, ergo, it goes on 4797 as you have described. It is not treated as a personal capital asset. NOL, maybe, but that's just the way it is.

Thanks Burke . .